Plymouth's finance chief accused of 'crying wolf' over bankruptcy warning

Plymouth’s Labour finance chief has denied "crying wolf" over a warning that the city council could face a £50million hole in its finances due to the pandemic.

The issue came up as the city council considered a report forecasting an overspend of £922,000 at the end of March 2021 on a budget of almost £194million.

In May the council had received £15million of extra Government funding towards the cost of its response to the pandemic.

Labour’s Cabinet member for finance Mark Lowry warned then that the sum would have to be tripled to cover estimated income loss and extra spending for the council to balance its books, or it could face bankruptcy.

At a meeting of the full council on Monday, Conservative group leader Nick Kelly said the new financial report was "extremely reassuring", but he was confused by Cllr Lowry’s comments six months earlier.

Cllr Kelly congratulated staff for the current financial position and for distributing Government funding to local people and businesses, and asked: "Which is right? Is it the £50million, or is it that our Government has been listening and provided the adequate funds to ensure that the council has maintained its financial status?"

He said the Government support had been unprecedented and asked whether the £50million deficit and bankruptcy warning was an "exaggeration" and a case of "crying wolf prematurely", or if Plymouth was heading the same way as Labour-led Croydon which had declared bankruptcy.

Cllr Lowry responded that he had always tried to give the council the facts on finances and said his comments in May were how he saw the situation at the time, based on advice from officers.

He said: "When I raised the spectre of bankruptcy at the beginning of this financial year and pandemic, I didn’t just dream those figures up, they weren’t just some cheap little headline-grabbing exercise.

"I was being realistic as to, in reality, what I was being told equally by officers as to the prospect for this council and its finances."

Cllr Lowry confirmed the projected overspend without Government support at that stage was more than £50million, and still was. He said the council had already received £22.5million support and was due to receive more relating to the current lockdown.

He said he was confident the council would be able to balance the books, but many others including Conservative-led authorities were worried they would be unable to.

Cllr Lowry warned there would be financial problems for councils next year, due to problems collecting council tax and business rates, and the Government would have to come up with new funding proposals.

He told the meeting that the council’s forecasting had been hindered earlier by delays in the Government setting out the financial support the council had now received.

He said the report covered the period to the end of September, and a lot could change by the end of financial year.

The predicted overspend had come down from an earlier report which forecast a deficit of more than £1million, and the council was "heading in the right direction" with six months to go until the end of the financial year.

Cllr Lowry highlighted key areas of financial pressure resulting from the pandemic, including £4million of extra spending on adult social care due to extra payments to care homes and providing personal protective equipment.

Almost £900,000 extra was forecast to be spent on bed and breakfast emergency accommodation due to an increased number of people seeking help with homelessness.

The pandemic had increased pressure on children’s services and an extra 34 children had come into care, with a further 16 expected, resulting in a £13million spending increase.

Lost income was predicted to be more than £1million from waste disposal and the sale of recyclables, £4.9million from car parking, and £200,000 from a share of the Tamar Bridge and Torpoint Ferry charges. Extra benefits payments were expected to add £1.1million to the budget.

Cllr Lowry said the council was continuing to lobby the Government for the "full compensation" it was promised at the start of the pandemic.